Everyone has heard stories about a director who’s overstayed his or her welcome, falling asleep at meetings or not contributing to the general conversation.
Dealing with a situation like this can be extremely uncomfortable. No one wants to sit down with a peer and deliver the hard truth that that individual simply isn’t making the grade anymore.
In part to avoid these awkward conversations, governance experts in Europe have begun a push to establish a hard-and-fast tenure period for directors. Whether it’s eight years or ten, an expiration date can be used to gently nudge directors off the board once they’re no longer contributing.
The question of independence has been at the heart of arguments in favor of firm board tenures. After a certain length of time, the argument goes, directors can no longer credibly be considered outsiders.
This debate overlooks some important aspects of what makes a director valuable. Often, it’s the director who’s served ten or fifteen years who has the institutional and industry knowledge necessary for shaping strategy. What’s more, some individuals will remain independent forever, while others will become “insiders” almost immediately.
Instead of arriving at a magic number of years a director can serve, why not establish an average board tenure? An ideal board might have a few individuals who have served two or three years, but then some who have served a decade or even longer. The best boards have a range of perspectives-- and a range of tenures, too.
When thinking about “term limits” for directors, step back and consider the mix of experience on your board and how it’s working for you. And if directors are napping in the boardroom, deal with that issue directly-- whether the individual joined the board twenty years ago or just last week.